Problem: Simms Manufacturing is considering two alternative investment proposals with the following data:
|
|
Proposal X
|
Proposal Y
|
|
Investment
|
$620,000
|
$400,000
|
|
Useful life
|
8 years
|
8 years
|
|
Estimated annual net
cash inflows for 8 years
|
$130,000
|
$80,000
|
|
Residual value
|
$60,000
|
$0
|
|
Depreciation method
|
Straight-line
|
Straight-line
|
|
Required rate of return
|
14%
|
10%
|
How long is the payback period for Proposal X?
a. 4.50 years
b. 4.77 years
c. 8 years
d. 10.33 years